AO insists credit insurance concerns will not affect profits as shares plummet by 16%

AO World has responded to reports in the press which speculated that the online electricals retailer had hit financial difficulties, which led credit insurer Atradius to cut cover for suppliers.

The electrical ecommerce site was coming under pressure to declare its cashflow position as its share price plummeted by 16% in response to the news.

Responding to the reports, AO World confirmed that its current financial performance and financial position remain in line with the board’s expectations and the guidance set out in its trading update on 29 April 2022.  

AO World has confirmed that one of its third-party credit insurance providers rebased its cover in May 2022. This reflects the dip in post-Covid sales levels and goes some way towards redressing the heightened levels of credit insurance that had been required during the pandemic.

READ MORE: AO.com credit insurer cuts cover

Credit insurance protects suppliers against the risk of customers going bust between an order being accepted and payment being made. Without it, suppliers typically require payment upfront.

The rebased cover has had no effect on AO’s liquidity position, which the retailer says remains in-line with the board’s expectations for FY23.

AO World announced the decision to close its German operations last month in order to focus its attentions on the UK market, after issuing its third profit warning in three months at the end of April.

The pureplay online retailer will also continue to have full access to its £80m revolving credit facility, the term of which runs until April 2024. A number of “ ongoing initiatives” are being implemented to boost profits against against what it describes as “uncertain macroeconomic conditions” in the UK and the continuing global supply chain challenges.

The company also warned it had been impacted by shoppers cancelling warranty policies amid the cost-of-living crisis.

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